How to Start & Protect Your Startup: Fundamentals for 2020
The fundamentals of business landscapes are shifting, as promising startups have stormed through industry gates and cemented their places. However, there is a hard and well-known truth that floats around this startup bubble: 90% of Indian startups fail within the first 5 years (suggests a study done by IBM Institute for Value (IBV) along with Oxford Economics).
The study also suggests that 77% of Venture Capitalists believe that the biggest reason for this rate of failure is the lack of innovation & new technologies. This sentiment among VCs is proven by the fact that India is miles behind its Asian counterparts in terms of patents. In 2015-16 while China, Japan & South Korea filed 29,846; 44,235 & 14,626 patents, India only filed 1,423 patents. 70% of these patents were filed by foreign companies and the rest was shared by Indian companies & academia.
Other reasons include lack of skilled workforce, lack of funding, inadequate formal mentoring and poor business ethics. There are no Meta startups like Google or Facebook in India. However, the startup culture is surviving on emulation. Large Indian startups such as Oyo, Ola & Flipkart have copied concepts from the successful likes of Airbnb, Uber, and Amazon. Those had an early mover advantage in an untapped market.
At ‘TheStartupLab’, we help businesses overcome such challenges and protect them from failure. This starts with fulfilling basic requirements. They include:
It’s essential to register a business before anything else. A business can be incorporated in different forms according to the preferred structure such as Proprietorship, Partnership, One- Man Company/Corporation (OMC), Private Limited or Limited Liability Partnership (LLP). These registrations can get tricky if not done under appropriate guidance. It is extremely important to keep the paperwork strong from the very beginning of your startup to avoid possible problems during the growth stage.
To understand the types of incorporation better, below have we summarised each of them –
- Proprietorship – Small businesses and traders with one primary owner/contributor. This form of business is not a separate legal entity and hence there is no legal distinction between the owner and the business, resulting in an unlimited liability attached to the owner. This form of enterprise is also extremely less likely to secure funding and receives very minimal tax advantages.
- Partnership – A very similar structure as of proprietorship but with two or more owners (called partners). The terms between the partners are mutually decided and documented on an agreement called ‘the partnership deed’ and are not treated as a separate entity. The liability of the business is passed on to its owners and this form of an enterprise is very less likely to secure funding.
- One-Man Company (OMC) – A ‘One Man Company’ is a simple combination of a proprietorship and a company form business. Similar to a company form of business the single member of a One-Man Company is a subscriber of the separate entity that is the business. This essentially means that there is only one shareholder in the company, and he/she shares limited liability. Such businesses are less likely to secure funding unless they have a unique product or USP.
- Limited Liability Partnership (LLP) – This is the most common form of incorporation among startups these days. An ‘LLP’ is a convenient combination of a Partnership form of business & a company form of business where the partners are directors in the business who owns a mutually agreed-upon percentage of shares and limited liability. An LLP form of company is more likely to secure funding among the others above.
- Private Limited – As the name suggests, a ‘Private Limited’ company is owned privately and the liability of its members (minimum of 2) is limited to the number of shares owned by them. A Private Limited company is the most secure form of business in India and is highly likely to secure funding.
To get your business incorporated with professional help, visit here.
Necessary Registrations and Licenses
Registrations and licenses are provided by governing bodies to maintain industry standards, keeping in mind the needs of the market and people. Be it food, technology, services or any other recognizable industry, a license or a registration helps business recognize as a legitimate entity that adheres to certain standards, if not better it.
- GST – Goods & Services Tax (GST) has proved to be a big taxation reform in India since its implementation on 1 July 2017. This registration is pivotal to proceed with any taxable corporate income in India. As a part of our GST services at TheStartupLab, we help businesses not only register but also file it periodically.
- FSSAI License – The Food Safety & Standards Authority of India is a body established by the Ministry of Health & Family Welfare of India to regulate the food industry standards. Legally, every restaurant/tiffin service or any other related service business in India is required to acquire the FSSAI license before starting a business. Acquiring this can be an arduous task as the standards have variable benchmarks. We help businesses with the filing and compliance knowledge of the same.
- ISO License – Headquartered in Geneva, the International Organisation for Standardisation is a body of representatives from various national industrial & commercial standards organizations. For example, FICCI in India. The license agreement for various standards under this international board is important for businesses to have a certain level of reliability among customers. Our licensing experts help our partner startups with all standards licensing to ensure that they have reliability in the market.
Intellectual Property Rights
Intellectual Property Rights are given to people over particular creations which may or may not be tangible but are valuable. These rights ensure over a particular period of time that restricts other entities from using the property.
- Patent – A patent is the most potent form of Intellectual Property as registration for this is mandatory. It excludes everyone except the inventor from making, selling or using that particular invention for a particular period. Having a patent empowers and showcases a unique concept, service, design or product. All patents in India are governed under the Indian Patents Act of 1970.
- Copyright – Copyright enables legal ownership of original work. It protects the work under stern IPR laws. It can cover literary, dramatic, artistic and even musical work. They include comics, novels, poetry, songs, software etc. In India, the doctrine of fair dealing has been dealt with under Section 52 of the Indian Copyright Act, 1957
- Trademark – When businesses are responsible for their products and services, their trademark helps protect their consumers by assuring their brand. All Trademarks are governed under the Trademarks Act 1999.
- Design Registration – Design registration is a form of IPR which protects new designs from counterfeiting. The particular aspects included are shape, configuration, surface pattern, the colour or line or a combination thereof as applied to an article which produces an aesthetic impression on the sense of sight. The Designs Act 2000 governs matters in this area.
Incorporating your business is just the beginning. Statutory and legal compliances can be a daunting nightmare for any business, especially if they are unaware of them. Rules, policies & standards mandated by law exist to standardize products, policies & services. It is no secret that
the last decade has seen a spike in the number of startups in India. As a result, the compliances have not only increased but also become strict. Worry you not, for we not only have a checklist for you, but also a standing team/framework to help startups deal with compliances:
The legal compliances vary according to formats. For example, a Limited Liability Company must be registered under the Limited Liability Partnership Act 2008 with the MCA (Ministry of Corporate Affairs).
Whereas the incorporation of a Private Limited Company is governed by the Ministry of Corporate Affairs, Companies Act, 2013 and the Companies Incorporation Rules, 2014.
The selection of the form of the company has various considerations such as the nature of the company (product/service), liability protection, tax efficiency, statutory compliances, etc.
It is therefore advisable to have a legal advisor in the team.
- Bank account – The first requirement after incorporation and before starting any operations is opening a ‘Current’ Account in the name of the incorporated company. This is when you’re reminded of another essential called the ‘PAN Card’. It is a fundamental requirement to open a bank account. How about we let you in on some secrets that we use to help our partner startups?
- A lot of banks offer special privilege accounts to startups. Getting one of these is an easy way to avail of some financial benefits right from the word ‘go’.
- If you have applied for the PAN and cannot wait to get started, you can use the challan to open a current account.It is advisable to get started with two bank accounts. The second one comes in handy if the first one falters.
- GST Registration – All businesses in India must have a GST registration. It is not just about tax regulation; startups can even avail of various benefits under the GST Composition Scheme. Startups generating less than INR 40,00,000 turnover (and INR 10,00,000 from the North Eastern States) are not mandated to have a GST registration.
If a startup is supplying goods across state borders (Inter-State Trade), they must have a GST registration irrespective of their turnover. This does not exempt an online service provider.
- ITR – Filing an Income Tax return is mandated by law even if a startup has made no income in a year. Non-compliance can enforce prosecution, an investigation by the Income Tax Department & allow levying a penalty/fine.
Startup programs by the Government of India help startup entrepreneurs by giving them tax benefits. Private Limited companies, LLPs (Limited Liability Partnerships) or Partnership firms may be eligible for other benefits as well.
These exemptions include 100% exemption excluding the Minimum Alternate Tax (MAT) on earnings for the first three years. Department of Industrial Policy and Promotion (DIPP) registration is necessary to avail of this.
Startups can also get an exemption of 20% of their capital gains that result in profits. These include profits earned from the sales of stocks, bonds, and shares.
- Share certificates – A company must issue share certificates to its shareholders within 2 months of its incorporation. A company can be levied a fine of up to INR 5,00,000 for Non- compliance & the Directors can be penalized to the effect of up to INR 1,00,000.
- Statutory Compliances – Minutes of Meetings (MoMs) and other statutory registers like the register of directors etc. must be kept on record by companies. They also need to be filed with the Registrar of Companies periodically. These are formal documents of evidence for the decisions taken by the company. The penalty of non-compliance ranges from INR 50,000 to 3,00,000
- Annual Returns – The Ministry of Corporate Affairs recently shut down 1,00,000 companies for non-compliance with this provision. The Companies Act, 2013 mandates every company to file its annual returns (Form MGT-7) with the Registrar of Companies within 60 days of it’s Annual General Meeting (AGM).
- Auditor Appointment – All companies need to appoint an auditor within 30 days of incorporation. The appointment must be done by the board of directors. Now the role of an internal auditor is to ensure that the financial position of the company is accurately represented in the books. Hence, having a trustworthy CA/CFA is pivotal. It should also be noted that before appointment every auditor must submit a written declaration stating that he/she is qualified for the position. Our team of auditors is an experienced bunch who have helped businesses of all sizes with due financial statements. We have extensive training in protecting startups or insulating startups from finance-inflicted failures. A healthy book represents a healthy startup.
- Accounting – Getting busy with an attempt at making your startup or business success has obvious potential., but it also has its disadvantages. It is easy to ignore operations such as accounting once the work increases. Worry you not, because, at TheStartupLab, our team of accountants will ensure that your books are in order. To top it off, we even help maintain an investment portfolio.
The penalties for non-compliance with this are about 12 times the cost of filing the required statements. Directors can even be liable for fines up to 5,00,000 and/or 6 months imprisonment.
Here is a complete range of services that you could get from a company like TheStartupLab to help you with the above mentioned:
- Company Registration
- LLP Filing
- Change in ROC
- Company Annual Filing
- Closure of Company
- Change in Name
- Revival of Company
- Trademark Filing
- Patent Filing
- Copyright Filing
- Design Filing
- IEC Code
- Shop Establishment
- Partnership Registration
- GST Registration
- ISO Registration
- Excise Registration
- NGO /Trust Registration
Other Legal Services
- Terms & Conditions
Accounting & Taxation
- Business Restructuring
- International Business
- Opportunity Diligence
What does an entrepreneurial endeavour/startup survive? Money/funding? Perhaps. Employees? Of course. Innovation? Yes. But what good would all of them be without business?
There’s a reason why the need for Business Development (BD) professionals among startups have seen a massive spike. It is quite ironical that not many of these startups and professionals are aware of what needs to be done for the business development in those industries for those particular businesses. No one is to blame though, even conglomerates & giants at some point have failed in this endeavour.
The role of a Business Developer can range between efforts into strategic partnerships, acquisitions, licensing, product distributions, monetization, etc. This role depends on factors such as size & type of startup.
Employing a full-time experienced sales/business development team can be an expensive endeavour. Salary, on-boarding, training and retention costs can be massive. The effects of a bad hire can even cripple a business.
Outsourcing sales & business development for startups can prove to be economical for a company that is starting to grow. While responsible for things like development, finance, setting the vision, human resources and all the other obligations, sales can be overlooked and under- serviced.
Now, most businesses fail to recognize the importance of online business development. As a result, a large fraction of their potential is not realized.
Online Business Development
- Digital Branding – Branding is a useful tool for setting your startup apart from the thousands out there. Several tools make for an efficient & effective brand language. It all starts with making a logo, brand language consistency across platforms & establishing base analytics. We have focussed teams for each of these categories that have helped several businesses develop a robust system for online business development.
- Search Engine Optimization – A lot of professionals out there guarantee ‘solid SEO’. Some are genuine, and some just depend on stuffing keywords & a big campaign budget. We focus on proven strategies for organic growth and if need be, paid campaigns (discussed in the next point). The best thing about SEO that it costs no money. We help identify what audiences on the different platform need from different industries and businesses.
This knowledge, in turn, is imbibed in the content that we help produce. The biggest reason to favour the SEO route is that the ROI is extremely high.
SEO practices must not be just focussed on Google search results. It should also focus on AI semantics, quality content, visual searches & even voice-based searches.
- Digital Marketing – Digital Marketing has changed much more rapidly over the last two decades than marketing has in the previous 50 years.
Most startups these days have adopted digital marketing. But not all the weapons that digital marketers have in their arsenals are equally effective. Some digital marketing strategies hit the bullseye, while others don’t even come close. The key lies in having a 360-degree approach. It means covering search engines, email marketing, influencer marketing, viral marketing, etc. Only a small percentage of startups have been able to implement a 360-degree approach in this aspect. We take great pride in our ability to help our partners in this successfully.
- Content Development – ‘Content is king’ seems to be a popular opinion in the digital landscape. Good quality content not only sells itself but also products and services associated with it. A good content development team is the first door to a successful digital marketing campaign. It is not just about writing catchy lines, and good articles, it is about producing what the audiences need and what. We know how to do just that.
Offline Business Development
- Business Expansion – The best way of survival is growth. Expansion is an important tool that helps with growth. By expansion, we mean increasing profitability by building strategic partnerships and making strategic business relationships.
- Corporate Connections – Our engagement programs aim at establishing corporate connections with startups and corporates to build an ecosystem that helps nurture our partners.
- B2B Relationships – A strong network of B2B relationships is one of the most valuable assets for a startup. These can be clients, customers, suppliers, vendors etc. While the context of B2B relationships may vary, two things remain constant: amicability 7 trust. At TheStartUp lab, we have fostered a community that ensure a symbiotic growth for all our partners in this aspect.
- Mentorship – Over years of working with various businesses, we have developed a network of mentors from various domains and expertise. They are visionaries that aim to steer startups in the right direction, addressing the key business challenges and creating value for founders and their businesses.
Management of funds may seem like an outsider factor for startups, but it is what keeps the engine running smoothly. A lot of startups fail because they run out of money. Keeping a track of where each penny is coming from and going to is pivotal to this pursuit. We help establish budget and processes that keep this intact.
With a new startup, there are always expenses coming at you from every direction. Hiring a full- time staffer for this purpose might not always be on the cards. Most bootstrapped startups or even funded ones outsource it to an accounting management firm for this purpose.
An advisable financial option for startups these days is starting an investment portfolio as soon as it can be afforded.
Besides maintaining books, the biggest part of the financial aspect of startups these days is funding. Securing funding can be lucrative enough to draw entrepreneurial energy, but it is perhaps the most daunting task for startups.
Most investors have set criteria for investing in any startup. Some of the most important ones are team, product/service/innovation & market size.
- Team – Venture Capitalists love to invest in the right people. The people who start the business are the ones who shape their future. One way or the other, in the foreseeable future, they are the ones who will be making the decisions for the startup. Investors, therefore, prefer individuals who are skilled & motivated. Other traits include business- oriented, experienced & problem-solvers.
- Product – The product or the service of the startup is the centre of attraction for target audiences. Thus, to draw attention from investors, it must be supported by solid metrics/data. For example, if a set of authentic data suggests that a particular product or service could offer a solution to a substantial audience, it shows that there is a high chance of success and revenue generation. What else could draw the attention of an investor?
Another aspect of this is the experience of the startup or the founders in the industry or with the product. Even if a product is valuable, the inexperience of people involved could ruin the chances of the venture.
- Market Size – This bit is quite subjective because a large part of it could be projections. The ability of ventures to impact a large share of the market that they’re in always draws VCs & other investors.
- Pitch Deck – Let’s face it! Running a startup is usually roadblocked by a lack of investment. For securing funding, the first element needed is a pitch deck. Creating a good deck requires a few elements such as an apt representation of a USP, data, projecting scalability etc.
- Valuation – It always helps to know where your business stands. It helps make decisions, attract clients & attract investors. Valuation is not just about current assets. It includes revenue streams, futures, non-financial factors such as growth projections etc.
- Business Plan – A business plan is a strategic description of your business’s future, a document that tells what you plan to do and how you want to do it. The best plans are targeted and specific about factors such as growth and audience/customers/clients
- Future Financial Projections – Financial projections are forecasts of future revenues & expenses. Typically, it includes historical data & external factors. Just writing down good numbers only represents unpreparedness. It is advisable to hire an expert to make it.
We have fostered a network to help give small but meaningful financial boosts to the startups in our ecosystem. This way, we ensure 360-degree growth.
We evaluate companies and build detailed plans and ascertain growth projections. Based on this, we help decide the funds to be raised and its source. These could range from Angel investment to Seed funding and right through Series A/B funding from a VC firm or debt funding.
We also assist in necessary negotiations between two parties while drafting the share purchase agreements. Our large pool of partners, VCs & Mentor network helps startups raise funds. We aim to help our startups be financially robust and we are committed to this. Over the years, we have even worked with businesses in return for equity. This ensures that our commitment is aptly reflected.
We live in a digitally transforming world. Early adopters of this disruption have seen amazing results. We provide expedited expert digital marketing solutions to startups and businesses who can’t fork out a profuse budget at these early stages of the business? Don’t let these preliminary resource constraints you or your dreams of making it large in the online world. We at TheStartupLab aim to serve budding startups in any digital service.
- Website Designing – A website must be customer-centric. Be it the design or the content on it. It should guide the consumer through a journey that enables purchase. This requires a tidy understanding of the customer’s taste. The bases of aesthetics are defined by what is needed. We help make platforms what they should be.
- Mobile App Development – More often than not, people and startups dive into creating an app without any strategy. Much like web development, app development needs due diligence. Post planning, there are a few steps: discovery, UX/UI design, development & testing before launch.
- Digital Marketing – The core of the digital platform as it stands today is almost entirely based on four of the most significant factors that mould global community stigma and in turn digital marketing: the internet, the ‘world wide web’, social media and ‘Google’. We entrust our and our partners’ digital marketing needs in the hands of experienced professionals who have come through well.
- Technology Consultation – Every business with a digital presence faces unique roadblocks and challenges. Unique challenges require unique solutions. We have established KRAs that help us come up with robust solutions in the tech domain. Be it for websites, cloud computing, new technologies and even data management and programming.
Apart from these, we use digital and cloud-based information management and reporting systems to allow our clients to give local management ownership of activities, but central finance staff to retain overall control. With a plethora of experience in each of these fields, our expert ensures a robust digital presence for all our partners.
Service for Equity
We like to believe that we’re in it with all of our startup partners. Hence, when an opportunity comes along for an innovative new business that is bootstrapped or even funded but needs some help from us, we are open to working for equity.
We succeed with our partners and believe to invest in a future where our ecosystem is truly symbiotic. We assess risks associated, scalability, future-readiness, product/service & most importantly – the passion of the startup founders.
A progressive approach is what we have when it comes to working for equity.
Come what may, the value of a startup is not determined by just its current financial state. At TheStartupLab, we believe in passionate entrepreneurs. Hence, our combined services are aimed at collective growth. Something that we intend to use to help grow every business that needs & deserves a support system.